Subsidies as a job creation vehicle

Subsidies are not new in this country. They have existed for the last 50 years and have taken various forms. Fertiliser, fuel, education, housing and health subsidies are some of the examples.

Just consider what it takes to train a student at our universities and the actual tuition. The fertiliser subsidy is perhaps the most common one and has become so popular in the last five years. At some point John Tembo, former leader of Malawi Congress Party (MCP) and former president the late Bingu wa Mutharika tussled each other on who had the “fertiliser subsidy patent”. The successes of the subsidies are difficult to measure though since poverty levels remain unchanged.

The Malawi Government is currently implementing the Farm Input Subsidy Programme (Fisp) and Malata subsidy. The latter purportedly helps poor Malawians buy cheap cement and iron roofing sheets. Sentiments by its crafters at the onset specified the target: the poor only. Not everyone for sure.

At the official level, 55 percent of Malawians live below the poverty line. So, we expect this group to benefit. Of course, the 55 percent of the headcount, but there will be households over a million. In Ntchisi District, for instance, 13.3 percent of dwelling units are grass-thatched. In Dedza, there are about 13.3 percent grass-thatched houses as per the last population census. The picture does not look good in other districts except in the four major cities. Besides, owners of these houses will still need to get free fertiliser or some cheap ones. This new subsidy is an improved version of People’s Party (PP) small houses I must reckon. Under our subsidy policies, poverty is solved through cheap fertiliser, cement, roofing sheets, education and fuel.

Poverty has many dimensions. It is reflected in malnutrition, poor living conditions, ill-health, low life expectancy and many other ills that make basic living difficult. Getting people out of poverty means stopping them from worrying about whether they get their next meal. In other words, their spending pattern, as people get out of it, tends to drift away from food.

As a matter of fact, any tax-funded scheme such as these subsidies should make   the majority of Malawians stop worrying about food, shelter, access to basic   health care, education and energy. That is if these subsidies are carefully targeted and lead to job creation within Malawi not in other countries where we procure fertiliser for Fisp. We could be subsidising production, job creation in countries that export to Malawi while in our country we subsidise consumption that guarantees unemployment and tax losses on our own turf. Has it worked this way?

Let us look closely at the fertiliser, a major item of the national budget. Forget the perennial irregularities and its shady deals. It is worth a session on its own. Malawi has had one fertiliser company, Optichem (Malawi) Limited that has refused to grow for a bunch of reasons. Another company almost took off in Lilongwe before we switched our diplomatic ties. We have been importing these fertilisers even though we are a farming country. By subsidising fertilisers, Malawians have succeeded in creating jobs beyond our borders. We have given foreign companies an easy market and a motivation to create jobs in their countries.

Now we are about to create more jobs beyond our borders because we want to ensure that we have cheap cement and roofing sheets. I have doubts that this policy is effective unless government costs it well and share with the Malawian tax payer. We already have a situation of the area 49 houses that are being bought by foreigners. Maybe we all need a subsidy of some kind. After all, shelter is a basic need.

The fact that jobs will continue to be created beyond our borders through some wanton subsidies, I am tempted to think how one gets out of begging or expecting something from government. In the same way, our government has tried on many occasions to rely on donors; the focus should be reducing the number of our people dependent on subsidies.

Youth unemployment remains high. The jobs are not decent enough to ensure workers have a good wage to own their dream homes. It does not matter the colour of those dreams. If these subsidies are going to be systematic, a deliberate design should focus on supporting local industries that can create jobs. It can manifest itself through direct subsidies if specific businesses commit to employ new graduates.

It sounds simplistic, but the idea is that jobs will be created. For our government, I believe they love data and numbers. It is important to realise that every year, 200 000 young boys or girls finish high school, with little to do. Do they need cement or jobs? n